NCA's

Question 1

Describe the cost model for measurement of a NCA

Answer 1

Carrying Value = cost

Less - acc depn

Less - acc imp losses

Question 2

Describe the revaluation model for measurement of a NCA

Answer 2

Carrying value = Fair value

Less - acc depn

Less - acc imp losses

Question 3

What must an entity bear in mind if using a combo of the cost and revaluation models for measurement of NCAs?

Answer 3

A combination may be used but each class of assets must only use the same model ie cost model for PPE and reval model for land and buildings

Question 4

What is the double entry for depreciation charge?

Answer 4

Dr - depn expense (SPL)

Cr - acc depn (SFP)

Question 5

A change in depn method is a change in accounting estimate or a change in accounting policy? What is the significance of this?

Answer 5

It is a change in accounting estimate and so only applies to current and future accounting periods. As it is NOT a change in accounting policy, depn charges from earlier periods should not be altered

Question 6

Is a change in useful life/residual value a change of accounting estimate or policy? What are the implications of this?

Answer 6

It is a change to an accounting estimate and therefore will apply only to current and future accounting periods

Question 7

Describe how IFRS 13 defines Fair Value?

Answer 7

IFRS 13 defines fair value measurement as THE PRICE THAT WOULD BE RECEIVED TO SELL AN ASSET OR TRANSFER A LIABILITY IN AN ORDERLY TRANSACTION BETWEEN MARKET PARTICIPANTS AT THE MEASUREMENT DATE

Question 8

What are the entries to account for a revaluation upwards to a NCA?

Answer 8

Dr - asset cost

Dr - acc depn (this will wipe out the back of acc depn)

Cr - revaluation reserve

Question 9

What are The accounting entries to account for a revaluation downwards of an NCA? What point is important to note regarding the revaluation reserve?

Answer 9

Dr - revaluation reserve

Dr - expense

Cr - asset

The revaluation Reserve must exist in order to debit that account. Therefore this can only apply to an asset which has previously been revalued upwards. Otherwise the full cost must be expensed to the SPL.

Question 10

How is the gain/loss on disposal of an NCA calculated?

Answer 10

Net disposal proceeds - carrying amount